Ola's FY16 loss before tax jumps nearly 3-fold to Rs 2,313.7 Cr

Consolidated revenue for ANI Technologies Pvt Ltd, which owns Ola, increased more than seven times to Rs 758 crore in the year ended March 2016, up from Rs 103.8 crore in the year earlierShashwati Shankar&Madhav Chanchani | ET Bureau | May 01, 2017, 08:04 IST

India's largest cab-hailing application Ola racked up a consolidated loss before tax of Rs 2,313.66 crore in FY16 compared with a year-earlier loss of Rs 796 crore as it spent heavily on defending its market leadership against US-based rival Uber.

Consolidated revenue for ANI Technologies Pvt Ltd, which owns Ola, increased more than seven times to Rs 758 crore in the year ended March 2016, according to regulatory filings with the ministry of corporate affairs, up from Rs 103.8 crore in the year earlier. This includes revenue of subsidiaries such as leasing unit Ola Fleet Technologies and TaxiForSure parent Serendipity Infolabs.

“Advertising, initial driver incentives, strikes in major cities and customer discounts are some of the contributory aspects to the losses seen for Ola,“ said an analyst. “However, there has been a slight decrease in losses seen since driver incentives fell. We can expect to see a 15% cut in losses (in 2017), since the number of trips have also increased.“

Some of the areas where Ola spent include hiring and marketing expenditure. Employee costs went up more than five times to Rs 379 crore in FY16, while advertising and sales promotion cost rose four times to Rs 385.5 crore. Ola has around 5,000 employees. It had added 1,700 staff in early 2015 after its acquisition of TaxiForSure, of which a large number was laid off in September 2016.

Analysts and Ola employees indicated that the company had spent aggressively on marketing and advertising new products and features associated with different cab categories to acquire new customers. But in terms of standalone operating revenues, the Travis Kalanick-founded company's local unit, Uber India Systems, was catching up with ANI Technologies at the end of FY16.

While Ola reported operating revenues of Rs 383.44 crore for the year, Uber India Systems closed with Rs 374.79 crore with a profit of Rs 28.84 crore. Both Ola and Uber charge 15-20% commission from drivers.

But experts said Uber's numbers can't be taken at face value. “The internal structure of the company is complex,“ said the analyst cited above. “Some of the expenses go through the parent company so the expenses don't look as high (in the Indian market). This is likely to be routed through a Netherlands-based entity Uber BV .“ There was no response to emails sent to the Ola and Uber spokespersons.

In December, Ola cofounder Bhavish Aggarwal raised the issue of overseas companies such as Amazon and Uber, flush with funds, pumping money into India to grab market share at the expense of homegrown startups.

Ola has till date raised about $1.5 billion from players like Japanese internet and telecom player SoftBank besides investment firms such as Tiger Global Management, Falcon Edge, DST Global and Matrix Partners India. It also counts Chinese cab-hailing giant Didi Chuxing, which recently closed a round at $50-billion valuation, as an investor.

But even with billions raised and backing from big investors, Ola has to compete with Uber, which is the world's most well-funded startup with over $15 billion raised in cash and debt, and valuation of close to $70 billion.

In a visit to India in January 2016, Kalanick had said Uber could double its pledged investment of $1 billion if it sees more than five times the return. It ramped up the pace of investments in India after exiting China in August last year.

But Uber has been facing significant headwinds this year in the US after a former employee detailed alleged instances of sexual harassment in a widelyread blog post in February. Apart from so-called 'bro' culture issues that have cropped up since then, Uber has also been slapped with an intellectual property lawsuit by Google's Alphabet-owned Waymo, the driverless car unit.

In 2016, Ola and Uber together clocked a near fourfold increase in the number of rides booked through their platforms compared with the previous year, according to a report by research and advisory firm RedSeer Management Consulting. Industry estimates place the market share for Ola at around 65% with Uber holding the rest in the taxi aggregation business.

According to analysts and employees at Ola, the company clocked about 6 million weekly rides on average between September and December 2016, across all its offerings - cabs, auto-rickshaws and shuttle buses. The major source of revenues for both Ola and Uber -around 70-75% -comes from their economy services including Ola Micro, Ola Mini and UberGo, analysts and investors said.

Ola's plan to work closely with the government and introduce electric vehicles in the top cities in the country in the coming months is expected to boost the Indian company's prospects.